innovation challenges in china through
TRANSCRIPT
Examining Industrial Innovation Challenges in China through the Lens of Environmental Protection Industry
China Everbright International Limited – Chen XiaopingJune 2013 (Hong Kong)
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Contents
1. Environmental Crisis in China
2. Environmental Crisis Breeds Opportunities for
Environmental Protection Business
3. Innovation and Challenges in the Environmental
Protection Industry in China
4. Conclusion
Examining Industrial Innovation Challenges in China through the Lens of the Environmental Protection Industry
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Rapid economic development underscores environmental problems in ChinaChina’s rapid economic development has caused destruction to the environment and waste of resources and has worsened environmental problems.
1. Environmental Crisis in China
Areas affected by acid rain
Polluted river
Polluted waters
Desert
Severely damaged forest
Environmental problems in China
Environment pollution
Affected river
Areas affected by acid rain
Polluted water basin
Desertification
Existing desert
Desertification areas in the north
Reasons of desertification
Over‐breeding and over‐harvesting
Over‐grazing
Areas of severe forest damage
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Water pollution (1)
Cyanobacterial bloom in Dianchi LakeHuaihe River water pollution
Weifang groundwater pollution Red tide in Bohai Bay
1. Environmental Crisis in China
Chinese manufacturers discharging wastewater underground Hazardous
wastewater flowing into deep wells
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60.60%27.90%
11.50%
Type I‐III
Type IV or Type V
Poor Type V
68.70%
20.90%
10.40%
Type I‐III
Type IV or Type V
Type V (Poor)
Water pollution (2)
Statistics on Groundwater Quality in China
Source: “Communique on Land and Resources of China 2012”, Bulletin of China's Environmental Conditions 2012, Ministry of Environmental Protection.
Statistics on Water Quality of 61 key Lakes and Reservoirs in China
Statistics on Water Quality of 10 Key River Basin in China
1. Environmental Crisis in China11.80%
27.30%
3.60%
40.60%
16.70% Excellent
Good
Satisfactory
Poor
Very Poor
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Solid waste pollution (1)
Urban waste piling up
China’s municipal solid waste non‐hazardous treatment volume has significantly increased.
It has increased approximately 63%from 80,510,000 tonnes in 2005 to 130,900,000 tonnes in 2011.
Source: China Urban Construction Design & Research Institute
The average clearance volume of municipal solid waste is 154 million tonnes/year from 2006‐2011. It is expected to increase to 210 million tonnes/year in 2015.
1. Environmental Crisis in China
Waste clearance volume (ten thousand tonnes) Non‐hazardous waste treatment volume (ten thousand tonnes)
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Solid waste pollution (2)
Urban waste piling up(Beijing as an example)
Photo Exhibition of Wang Jiuliang in 2011 “Beijing Besieged by Waste”
Note: The yellow marks indicate landfills of different scales
Waste piling up outside a small community in Liyuan, Tongzhou District, Beijing
1. Environmental Crisis in China
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Solid Waste Pollution (3)
Soil pollution (Cadmium‐Tainted Rice Scandal)
1. Environmental Crisis in China
Land contaminated by heavy metals
Farmland polluted by heavy metals
Deformed water spinach contaminated by cadmium
Polluted and deformed vegetable Polluted vegetable
consumed by human
Polluted vegetable used as
animal feed
Soil pollution
Jeopardize the food chain in
China
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Air pollution (1)
1955, Los Angeles Photochemical Smog(400 deaths)
1952, London Smog (12,000 deaths)
2012, Beijing Smog (?)
1. Environmental Crisis in China
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Air pollution (2)
Air quality in 74 major cities in China in the first quarter of 2013
Source: Ministry of Environmental Protection of the People's Republic of China, "Air quality in 74 major cities in China in the first quarter of 2013"
1. Environmental Crisis in China
44.40%
25.30%
11.50%
13%
5.80%
Standard
Mildly polluted
Moderately polluted
Heavily polluted
Severely polluted
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Air pollution (3)
2012 National Distribution of Acid Rain in China
Source: China Environmental Monitoring Centre
1. Environmental Crisis in China
Frequency
Area as a percentage of the
country size
N/A
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63 72 83 100121
142 158
210
338
0
100
200
300
400
2006 2007 2008 2009 2010 2011 2012 2015 2020
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
Urban and rural sewage treatment (1)
Capacity of waste water treatment in China is growing rapidly
mn cubic meters/day
Source: Ministry of Housing and Urban‐Rural Development of the People's Republic of China
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Urban and rural sewage treatment (2)
Urban and Rural Waste Water Treatment Rate and Target (During the Twelfth Five Year Plan)
Source: Twelfth Five‐Year Plan on National Urban Wastewater Treatment and Recycling Facilities Construction Program
77.5%
85.0%
72%
76%
80%
84%
88%
2010年 2015年
60.1%
70.0%
52%
56%
60%
64%
68%
72%
2010年 2015年
20%
30%
0%
5%
10%
15%
20%
25%
30%
35%
2010年 2015年
Urban waste water treatment rate
County waste watertreatment rate
Designated towns waste water treatment rate
2010 2015 2010 20102015 2015
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
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Non‐hazardous treatment rate of urban household waste in China(As shown in the chart below)
52.2
62.066.8
70.5
77.8
90.0
100.0
50
60
70
80
90
100
2006 2007 2008 2009 2010 2015 2030
%
Household waste disposal (1)
Source: United Nations Statistics Division, National Bureau of Statistics of China, Ministry of Housing and Urban‐Rural Development
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
15Source: The National Plan for the Construction of Facilities for Treatment of Urban Household Waste in a Non‐Hazardous Way under the 12th Five‐Year Plan
Incineration20%
Composting3%
Landfill77%
Incineration35%
Recycling6%
Landfill59%
20102015 Target
Household waste disposal (2)The distribution of different non‐hazardous treatment methods of
urban household waste in China (see chart below)
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
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63.0%
13.5%
5.4%
1.8%
1.8%
14.4%
土地填埋
好氧发酵及农用
自然干化综合利用
焚烧
露天堆放
外运
Sewage sludge disposal
Wet sewage sludge produced by urban waste water plants in China (water content 80%) Generation and forecast (2010‐2015)
Ratios of different sludge treatment methods in China (2010)
2,004 2,241
2,521 2,800
3,080 3,360
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2010年 2011年 2012年 2013年 2014年 2015年2010 2011 2012 2013 2014 2015
Ten thousand tonnes
Source: survey data from h2o‐china.com and quarterly figures from Ministry of Housing and Urban‐Rural Development;“2013‐2017 In‐depth Survey and Investment Strategy Planning Analysis on Sludge Treatment and Disposal in China”
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
Landfill
Aerobic fermentation and agricultural use
Natural dehydration for integrated usageIncineration
Open dumping
Exported
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Industrial solid waste generation and treatment status
Ratios of common industrial solid waste treatment methods in China in 2011 (Generated a total of 3,265,370,000 tonnes)
Ratios of hazardous waste treatment methods in China in 2011 (Generated a total of 35,140,000 tonnes)
Source: Ministry of Environmental Protection of the People's Republic of China,“Yearbook of Environmental Statistics 2011”
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
0.1%
59.8%18.5%
21.6% Dumping rate
Comprehensiveutilization rate
Storage rate
Disposal rate
50.5%
23.4%
26.1%Comprehensiveutilization rate
Storage rate
Disposal rate
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Environmental protection industry total value
0.7
2.0
4.5
0
1
2
3
4
5
2005年 2010年 2015年
Trillion RMB
Source: the 10th, 11th and 12th Five‐Year Plan for the Energy Conservation and Environmental Protection Industry
2. Environmental Crisis Breeds Opportunities for Environmental Protection Business
2005 2010 2015
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System innovation
The Ministry of Construction issued the “Opinions on Speeding up the Marketization
Process of Public Utilities” in 2002
Government investment
World Bank and Asian Development Bank loan
Foreign government loan
Government investment
World Bank and Asian Development Bank loan
Foreign government loan
Society capital
Foreign capital
Government investment (diversified investment)
Society capital
Foreign capital
Government investment (diversified investment)
Evolution of investment entities
Evolution of investment entities
Direct government participation
Specialized operational services
Entrepreneurial operation
(Government procurement of service)
Evolution of service model
3. Innovation and Challenges in the Environmental Protection Industry in China
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Business model innovation
Design / Construction / Equipment / Operation (Compartmentalization)Design / Construction / Equipment / Operation (Compartmentalization)
EPC /DBO/BT/ Entrusted operationEPC /DBO/BT/ Entrusted operation
BOT / BOO/TOT(Franchising)BOT / BOO/TOT(Franchising)
Environmental Protection Industrial Park (Circular Economic Park)Environmental Protection Industrial Park (Circular Economic Park)
Integrated Environmental Services / Contract Environmental ServicesIntegrated Environmental Services / Contract Environmental Services
3. Innovation and Challenges in the Environmental Protection Industry in China
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Focusing on the characteristics of environmental protection industry in China
Technological Introduction
Digestion and Absorption
Integration of Production, Learning and Research
Self-development
3. Innovation and Challenges in the Environmental Protection Industry in China
Technological innovation
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Industrial innovation challenges (1)
Local protectionism still exists
Project bidding market has yet to be regulated
Market entry and exit mechanisms have yet to be established
Domestic capital market/stock listing system have yet to be improved
Challenges in System Innovation
3. Innovation and Challenges in the Environmental Protection Industry in China
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Industrial innovation challenges (2)
• The design of national industrial policy is not compatible with the market environment
• Tax incentives and other complementary policies are extremely backward
Challenges in Business Model
Innovation
Challenges in Business Model
Innovation
• Technological standards in some areas are extremely backward or even absent
• Use of research funding and conversion efficiency have yet to be improved
• A severe lack of corporate innovation capability and resources
• A lack of intellectual property protection
Challenges in Technological Innovation
Challenges in Technological Innovation
3. Innovation and Challenges in the Environmental Protection Industry in China
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Everbright International’s practice of innovation in the environmental protection industry in China (1)
Technological innovation
Mechanical grate boiler Fuel gas purification system Landfill leachate treatment system
Reusable water Water source heat pump
3. Innovation and Challenges in the Environmental Protection Industry in China
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Everbright International’s practice of innovation in the environmental protection industry in China (2)
Business model innovation
Environmental Protection Veinous Industrial Park Model
3. Innovation and Challenges in the Environmental Protection Industry in China
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InvestmentInvestment
Consultation and Design
Consultation and Design
Technological DevelopmentTechnological Development
…………
Construction Construction
EquipmentManufacturing
EquipmentManufacturing
OperationOperation
Wind powerWind
power Biomass power
generation
Biomass power
generation
Waste water
treatment
Waste water
treatment
Reusable water
Reusable water
Waste water source
heat bump
Waste water source
heat bump
Sludge treatment
Sludge treatment
Watershed management
Watershed management
…………
Soil remediati
on
Soil remediati
on
Hazardous waste
Treatment
Hazardous waste
Treatment
Solid waste landfill
Solid waste landfill
Methane‐to‐energyMethane‐to‐energy
Waste‐to‐energy
Waste‐to‐energy
Photovoltaic energyPhotovoltaic energy
Everbright International’s practice of innovation in the environmental protection industry in China (3)
Integrated Environmental
Service
Integrated Environmental
Service
Sector‐wide horizontal integration
Vertical expansion of
industry chain
3. Innovation and Challenges in the Environmental Protection Industry in China
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Examining Industrial Innovation Challenges in China through the Lens of Environmental
Protection Industry
Conclusion (1)
The environmental protection industryinnovation is still faced with many challenges inthe system, business model, and technologicalinnovation.
I believe that the solution to theenvironmental crisis in China is not about solvingtechnical or funding issues, rather, it is about thegovernment’s courage and determination toimprove the environment, and ultimately thepublic’s awareness to protect the environment andtake responsibility for our actions
Innovation
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Conclusion (2)
I believe that the environmental
protection industry will become a new
driving force for the industrial
development in China
Examining Industrial Innovation Challenges in China through the Lens of Environmental
Protection Industry
Innovation